President Donald Trump has energized an effort by moderate Republicans to lift the cap on a state and local tax deduction, one of the leaders of that effort in Congress said at a POLITICO event Wednesday.
“I think that is critical,” Rep. Mike Lawler (R-N.Y.) said at “POLITICO Playbook’s First 100 Days: Tax Reform” discussion, recounting that the president has lobbied committee chairs and other Republican lawmakers on the issue.
The maneuvering over the so-called SALT cap is emblematic of the complex and divisive issues Republicans still have to work through in their quest to assemble a legislation that would extend tax cuts enacted during Trump’s first term — something made clear by a trio of lawmakers at the POLITICO event.
Sen. Ron Johnson (R-Wis.) threw a curveball by suggesting a new approach to passing the tax cuts and other GOP priorities: Do it in three bills, instead of the one- or two-bills tactic Republican leaders have squabbled about. And Sen. Michael Bennet (D-Colo.) saw a silver lining for Democrats in the possibility of an expanded Child Tax Credit.
Here are the top five takeaways from the event:
“SALT Republicans” are ready to use their leverage
Lawler made it clear he and colleagues from New York, New Jersey and California would drive a hard bargain over their desire to lift the current $10,000 cap on the state and local tax deduction.
“I will never support a tax bill that does not lift a cap on SALT,” he said.
Given the GOP’s narrow majority in the House, Trump and Republican leaders in Congress are taking the threat seriously and looking for ways to satisfy the SALT group.
During his campaign, Trump vowed to address the issue and did so again in a recent meeting with SALT Republicans.
“I do think most of my colleagues recognize they need to do something on SALT as part of this negotiation if we are going to get a final bill,” Lawler said. “And, again, the president reiterating his support I think is vital here and that’s something that ultimately will help get this across he finish line.”
Lawler is also pitching the issue as key to Republicans keeping control of both chambers in the midterms, since the tax deduction is dear to many constituents in critical swing districts.
Trump is heavily courting other swing-district Republicans
As if on cue, Lawler said he was going to the White House to meet with Trump on Wednesday. Reps. Don Bacon (R-Neb.) and Brian Fitzpatrick (R-Pa.) were also part of the huddle.
Beyond SALT, centrist lawmakers could push back on ideas that have been floated to cut food programs and establish work requirements for Medicaid to fund the tax cuts.
Republicans don’t trust the bean-counters
The nonpartisan Congressional Budget Office has estimated that extending the expiring tax cuts would cost more than $4 trillion over 10 years, known in Congress-speak as the legislation’s “score.” While Republicans argue that is an over-estimate, many of them want the tax legislation’s cost to be offset.
Johnson, a member of the tax-writing Senate Finance Committee, was more blunt, calling it a “B.S. score.”
“I would ignore those scores,” he said.
Johnson backed Finance Committee Chair Mike Crapo’s plan to count an extension of the tax cuts as costing nothing since the existing policy is just carrying on, not being recreated from scratch.
“So there ya go, bingo,” Johnson said.
An expanded Child Tax Credit could also be in the mix
While Democrats have traditionally been the party pushing for larger expansions of the Child Tax Credit, many prominent Republicans, like GOP Conference Vice Chair Blake Moore (R-Utah), have indicated they would also like to expand the family tax relief in a reconciliation package.
Bennet, long a champion of the CTC who is also a member of the Finance Committee, said he’d be willing to work with Republicans on expanding it.
“It’s one of the top priorities, as I understand it for the Republicans,” said Bennet, adding he wants to see “ultimately, an enduring CTC and one that really does cut out childhood poverty.”
“We could lay the seeds of that in this legislative year,” he said.
Republicans haven’t settled key differences over reconciliation strategy
GOP lawmakers plan to use a process called budget reconciliation to pass their tax legislation and other priorities, which will allow them to circumvent a Democratic filibuster in the Senate.
Johnson told POLITICO that he believes Republicans should do three bills, rather than one (favored by House Republicans) or two (favored by Senate GOP leaders). The first two, which he said could move quickly through reconciliation, would carry border security funding and a straight extension of the tax cuts that are set to expire at the end of the year.
Republicans would then turn to a third bill aimed at simplifying a tax code that Republicans have long argued is too complex.
Johnson said the three-bill approach would “keep it simple.”
Comparing it to the House approach, he said: “They want one big massive bill to do all these things. That’s pretty complex.”
